CharityVillage® Research: Arts organizations jeopardized by Canada's move to U.S. funding model

Resources & Library

Path: Main Street : Resources & Library : Research Articles : Feature Article

Arts organizations jeopardized by Canada's move to U.S. funding model
December 26, 1995; Canadian FundRaiser
Small performing arts organizations will cease to exist and a major city such as Toronto will be able to sustain only one or two large performing arts companies if Canada moves to the American funding model, according to a study recently released by the Association of Canadian Orchestras.
The study, Revenues and Performance Activity of the Not-For-Profit Performing Arts Industry in Comparable Markets in the United States and Canada, was produced for the Income Managers Program of the Association of Canadian Orchestras and the University of Waterloo's Centre for Cultural Management, and was conducted by the Toronto-based Genovese, Vanderhoof & Associates, a performing arts income development and cultural management consulting firm.
"At the present time, the number and size of Canadian performing arts institutions and the amount of performance activity found in Canadian cities is much greater than the comparable size and activity found in the United States. Winnipeg, in fact, has more performing arts activity per capita than any other city in North America. It is government's funding of the industry in Canada that accounts for the major difference in the magnitude of the industry. Government funding has also encouraged the Canadian performing arts to develop artistically rather than commercially," the study states. This support has allowed Canada to develop a very vibrant cultural voice.
The study was undertaken to better understand the difference between the American and Canadian not-for-profit (NFP) performing arts industries. Its sponsors hoped that the American system could provide some answers for the Canadian industry that might sustain it through the current economic crises precipitated by recent major reductions in operating support from governments.
This study is one of three studies conducted by Genovese, Vanderhoof & Associates examining the economic issues revolving around the sustenance and economic return of the $400 million Canadian performing arts industry.
The study revealed the following:

Canadians are already contributing more in their respective markets to their performing arts industry than Americans.

Canadians have historically been comparing their performing arts organizations to those found in American markets which are much larger than their own. For example, Toronto compares its activity to that of New York City (The National Ballet of Canada to The American Ballet Theatre) when Toronto is not the size of New York but of Boston.

Most American markets the size of Toronto are able to support only one or two major performing arts organizations. The Boston market only supports one major not-for-profit organization, The Boston Symphony. The Toronto market supports a major orchestra, ballet, an opera company and two major theatre festivals.

In terms of government funding, Canada is in the unenviable position of being caught between a rock and a hard place - between the British and American funding models. The current mood of the government leans toward the American level of government subsidy without the government tax exemptions, postal subsidies or contribution encouragements.

Most Canadian companies, especially in Toronto, have already hit the ceiling in terms of earned revenue (through ticket sales and fundraising).

More revenue cannot be generated by staging additional performances. Many Canadian companies are already over- performing to their respective home markets.

A performing arts organization receiving less than 32% of its budget from Government returns at least that much back to government; a government employee, on the other hand, is 100% subsidized and only returns up to 53% of their earnings back to government.

Arts Councils in Canada have the propensity to protect those organizations that are least likely to survive in a market economy at the expense of the larger institutions. These small organizations also return less tax revenue back to government than the larger organizations.

As Canada moves to the American funding model, virtually all companies receiving government support in excess of 40% of their total revenues will cease to exist.

Reduction in government subsidies will force companies to cut back and in many cases to cease operation. Ultimately, the Canadian not-for-profit industry will mirror the American. However, without the commensurate expense subsidies enjoyed by the American companies and the ability to build endowments, the Canadian not-for-profit industry will be smaller than the comparable American industry.

Under the American model at least 22 of Toronto's performing arts organization with cease to exist.

By decreasing funding, the Government of Ontario will face an increasing deficit because the return to government from this particular industry is much higher than the current level of operating support.
"If Canada is to move to the American funding model, government must recognize that the same tax exemption and contribution encouragements must be put in place," stated Dory Vanderhoof, Partner, Genovese, Vanderhoof & Associates, the architects of the study. "It must also recognize that many smaller organizations which have been kept alive by Arts Councils will cease to exist, that Arts Councils themselves will no longer be relevant, that government will lose substantial tax revenue, and that Toronto will not have five major performing arts companies but one or two - as does Boston. Similarly, Winnipeg will lose much of its vibrant cultural activity and will mirror that of Omaha, a U.S. city of similar size and climate."
Copies of the report are available through the Association of Canadian Orchestras (416) 366-8834 at a cost of $29.